Currently a school district is funding health care premiums for retirees for a period of time. The person at the school that handles the program is looking for a cleaner way to run this program, and was told a 403(b) plan, which they do not currently offer, would be the ticket. Her goal is to limit the uses for the funds to health care premiums or health care related expenses only. I have never heard of any retirement plan that could put a limit on how money from the plan could be spent. Has anyone else ever heard of this scenario? If not does anyone have a creative idea to meet her goals?

One of our vested terminated employees was recently murdered by her husband. I assume the husband will still be eligible to receive her vested benefit under the pre-retirement spouse's death benefit program, however, I'd like to make certain of this. It just doesn't seem right that he would be eligible to receive the benefits. Is there any case law out there?

Participant directed plan, where loans are treated as participant directed.

Participant is full-time, drops down to part-time, and now the loan repayments cannot be supported by his pay, so his payroll deductions must stop.

My only question is what is the fiduciary's responsibility to pursue collection of this amount? Should they sue the participant for collection? Force them into bankruptcy, etc.?

The Plan stipulates that discontnuing payroll deductions is an event of default.

401(k) Plan with Cross Tested Profit Sharing. My coverage ratios in the rate group testing ratios exceed 70%, so I shouldn't have to worry about the Average Benefit % Portion. However, when I run the Gen Nondisrim Test results say I fail, because once you include deferrals the Average Benefit % Portion would fail. Since I don't have to worry about that part is there anyway I can get Relius to show me a passing test?

What are people's thoughts on this situation... Let me know if and where I go wrong:

Plan makeup:

- LLC taxed as a partnership

- 401k non SH, No match, W/ER PS contribution

- 10/31 FYE & PYE

- Cross Tested: Group 1 Partners (3 partners), Group 2 all others

All partners make $200k+

Passes ADP

No problems W/Cross testing contribution

Here is the situation... One partner is retireing on 10/31/04. That partner has deferred $1,000/month for each month of the 10/04 plan year. 2003 402g not exceeded. Partner wants to defer an additional $3,000 in month 10/04 to get to the 2004 402g of $13,000 which would mean a $15,000 deferral to the plan for the 10/31/04 plan year (see my math... $1,000 each month of 10/04 PYE + $3,000 additional in 10/04 for $15K).... ok? Partner also wants to deffer the $3,000 catchup. (With me so far)

Questions:

1 - Can the partner have a $15,000 deferral for the 10/31/04 plan year? (+ $3,000 catchup?)

2 - Wont it limit the max non elective contribution to the other partners to $41,000 - $15,000 or $26,000? That will ultimately mean that the other partners will not max out.. they will get $26,000 + $12,000 or $38,000 (if they continue at their usual rate of $1,000/month).

CAN they (the other partners) also make that $15,000 deferral like the retireing partner as outlined? Basically use up their 2004 402g in the first 10 months of 2004, not make any deferrals in 11,12/04 and then as a business going forward their employer profit sharing contribution will just be more to get them up to the max for the 10/05 year end?

Is there a better way? Thanks!

Plan sponsor "relieves me of my duties", and hires firm X that happens to employ at least one Enrolled Actuary. Although annoying, it was not a surprise, and we move on.

The sponsor decides not to pay my modest fee for completing the Schedule B, and X says, "we'll do it". Note that X's EA did not say that, but the EA's non-actuary boss. It is beyond consideration (in this case) that X will recalculate the items to be placed on the Schedule B. Many are available in my report, but a few can only be approximated (the actuarial term for "guess"). Let's assume I know this EA will not do any such recalculation.

Do any of you EA's see a problem, within the Code of Conduct, or something that should be brought to the attention of the ABCD? Any action suggested? Get over it?

My clients are a husband and wife with two children. The wife and children have health insurance with a traditional individual health carrier and the husband is insured with the risk pool due to pre-existing health problems. The husband is currently unemployed due to a reoccurence of major health problems. They have long term care insurance.

I have talked to Mrs. Client about possibly going to a HDHP and opening an HSA. Both Mr. and Mrs. client have long term care insurance. My two questions are :

1, Is 100% of Mrs. Clients LTC premium qualified to be used from the HSA tax free?

2, Mr. Client is unemployed and the following is listed as a qualifying expense "health insurance for the unemployed". Can my clients use funds in the HSA to pay Mr. Clients risk pool premium since he is unemployed.

Any guidance would be appreciated.

Thanks,

Paul

I am working with some clients and discovered that certain investments that are in SIAs/PSA require the insurance company to mail all finacial reports required to neede to complete the 5500 120 days after the end of the plan year. However, I am not finding that this is true for Mutual Fund/Registered Investments. Any reason why they were made exempt?

A participant wants to receive a lump sum distribution at age 49. The plan has a retirement age of 55 and provides for maximum benefits as a life annuity. The participant only has 4 years of participation as of the date of termination.

The actuarial equivalent assumptions are 8% pre-retirement and 5% 1983 IAF setback 5 years post-retirement.

What is the maximum lump sum that the participant can receive???

It seems obvious that the 8% AE assumption will cause that calculation to be used for the benefit. This is because you use the smaller of the AE or 5%/GAR adjusted benefits to determine the lump sum.

The question is on the reductions. The benefit must be reduced from 62 to 49 and then an immediate annuity factor can be used to determine the lump sum.

160,000/12 * .4 = 5333.33

I thought the calculation would be:

5333.33 * (178.4792 / 207.0814) * (1/1.08)^13 = 1,690.19

The APRs and discount are both calculated using the AE assumptions.

However, a different calculation has produced a higher limit:

5333.33 * (178.4792 / 207.0814) * (1/1.05)^7 * (1/1.08)^6 = 2,058.63

Both of these numbers could be multiplied by the annuity factor using the applicable interest rate and mortality table.

I happen to like the second number better because my lump sum is 21% higher but question whether my 'explanation' would hold up.

The reason is the retirement age under the plan and the pre and post interest rates for actuarial equivalent being different.

Does anyone have a problem with the second calculation??

An sole proprietor had a profit sharing and money purchase plan put in place for herself years ago. She is the only participant and her combined assets exceeded $100,000 about 9 years ago. She has never filed the Form 5500-EZ. As I understand, the statute of limitations goes back 6 years but that would expose her to a potential penalty.

Another thought is to file the latest 5500-EZ and roll the dice. Does anyone have any experience with the consequences to a backfiling like this or ignoring the backfiling and just filing the most recent return?

I read in a recent post that there may be regs that do not allow for eligibility provisions on any Safe Harbor Match contributions, would that apply to Safe Harbor Non-Electives too? Can someone point me in the right direction to read more about it...

Thanks for any help.

I have an employee whose spouse's child has just come into this country. I don't believe that this situation applies to the Special Enrollment regs. Would the dependent be able to come onto the plan as a special enrollee or would they have to wait until open enrollment?

Participant takes out a new loan, and payments are via payroll deduction.

For whatever reason the participant now believes they cannot afford to repay the loan. In fact they send a letter to the Administrator saying "cease all loan repayment deductions from my paycheck."

Where I come from, if the participant says stop withholding something, you must stop withholding (with a few exceptions).

What do you do? Stop withholding? If so, aren't we creating a back door for early distributions?

If not, how can you deny a participant's request to cease withholding? What if they sincerely can't afford it? Medical bills, etc.?

Probably a stupid question, but can forfeitures that are normally re-allocated to plan participants be used towards the required top-heavy contribution?

Thanks for any help!

In general: What services would an outside actuary normally provide to a pension plan being recordkept/administered by the retirement arm of a mutual fund company where there is no internal actuarial service offered. What services would a current actuary for a plan expect to provide to a plan that transfers its administration to an administrator that offers limited actuarial services and allows a pension plan to use its own actuary? In very general terms, other than contribution calculations, funding projections, Schedule B, and PBCG reporting, what services of a strictly actuarial nature need to be performed? Should an EA review and approve every distribution?

I have a cross tested plan that is being reviewed by the client's auditor. The auditor is saying, since different rate groups are being used, we have show a seperate ratio test for each rate group. I do not see anything in the instructions which indicates this is required. Am I missing something?

When we process a QDRO we typically provide the alternate payee distribution forms right away to take the money out of the plan. In this case, however, the alternate payee is also a participant in the plan. Should they receive any distribution rights or, as a plan participant, they would need to terminate per the plan document in order to have distributable event?

We have a plan that ceased benefit accruals effective March 1, 2003. The plan defines accrual service as service since date of hire. The plan requires a year of service (1000 hrs in first 12 months) for eligibility. An employee was hired June 1, 2002. He worked 1000 hours in 2002 and was eligible to participate in the plan on July 1, 2003. The employee has a year of accrual service as of March 1, 2003 when benefit accruals were frozen but was not a participant.

Is this employee entitled to an accrued benefit?

Client has a DB Plan, has no employees, so its Top Heavy....

Hires his first employee and wants to have an immediate eligiblity 401(k) plan.

The DB plan contribution exceeds 25% of pay so how does the TH min work? the DB plan has a 2 year wait so the new employee will not be eligible until 01/01/07 so there is the 2004, 2005 & 2006 TH min to worry about.

Seems like the client has to make a non-deductible contribution and that an excise tax would apply.

Can you specify that the employee is eligible for only a TH min accrual in the DB plan for 2004, 2005 & 2006? If he quits in 2005 he has 2 years of 100% vested TH accruals in a plan he never entered?

Thanks for any ideas or information.

I know the Schedule F was suspended, but what about the requirement for the Form 5500 itself? IRS vs. DOL vs. ERISA. This would be solely for a flexible spending account arrangement that that receives employee payroll deductions to reimburse for unpaid medical costs. Only 30 ees actively participating, but 114 employees are eligible to participate. I can't seem to get a straight answer.